The SEC explained that under Securities Act Rule 405, a firm’s WKSI status is automatically revoked because of its criminal misconduct absent a waiver from the SEC. In the SEC’s waiver order, the SEC determined that the bank “made a showing of good cause” and so would not be considered an ineligible issuer if it complied with the terms of a plea agreement.
SEC Commissioner Stein issued a dissenting statement regarding the SEC’s decision to grant a WKSI waiver to the bank, and asserted that the waiver “confers on the largest companies certain advantages over smaller companies.”
Lofchie Comment: The regular granting of waivers from statutory disqualification shows that the securities laws should be amended. Instead of being imposed on a WKSI automatically unless a waiver is granted, a disqualification should be imposed only where the SEC finds that it would serve a purpose. If the firm that violated the law has been adequately punished, then it is illogical to pile on an additional penalty for an unrelated activity.